This document provides the text of the Negotiable Instruments Act of 1881 in India. In 3 sentences: The Act defines key terms related to promissory notes, bills of exchange, and cheques such as "holder", "holder in due course", and establishes what makes an instrument negotiable. It distinguishes between inland and foreign instruments based on where they are drawn and made payable. The purpose of the Act was to define and amend laws around these negotiable instruments.

1. THE NEGOTIABLE INSTRUMENTS ACT, 1881
ACT NO. 26 OF 1881
[9th December, 1881.]
An Act to define and amend the law relating to Promissory Notes, Bills
of Exchange and Cheques.
Preamble. WHEREAS it is expedient to define and amend the law
relating to, promissory notes, bills of exchange and cheques ; It is
hereby enacted as follows
CHAP
PRELIMINARY
PRELIMINARY
1.
Short title.
1.Short title. This Act may be called the Negotiable Instruments
Act, 1881.
Local extent. Saving of usages relating to hundis, etc. It
extends to the whole of India but nothing herein contained affects the
'Indian Paper Currency Act, 1871, (3 of 1871). section 21, or .affects
any local usage relating to any instrument in an oriental language :
Provided that such usages may be excluded by any words in the body of
the instrument which indicate an intention that the legal relations of
the parties thereto shall be governed by this Act and it shall come
into force on the first day of March, 1882.
2.
Commencement.
2.Commencement. [Repeal of enactments.] Rep. by the Amending Act,
1891 (12 of 1891), s. 2 and Sch. 1.
3.
Interpretation-clause.

2. 3.Interpretation-clause. In this Act-
3* * * * * *
4["banker" includes any person acting as a banker and any post
office savings bank;]
5* * * * * *
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1 The words "except the State of Jammu and Kashmir", which were subs.
by Act 3 of 1951 for " except Part B States ", omitted by Act 62 of
1956, s. 2 and Sch.
2 Rep. by the Indian Paper Currency Act, 1923 (10 of 1923). See now
the Reserve Bank of India Act, 1934 (2 of 1934), s. 31.
3 Definition of the word " India", which was subs. by Act 3 of 1951
for the definition of the word " State ", omitted by Act 62 of 1956,
s. 2 and Sch.
4 Subs. by Act 37 of 1955, s. 2, for the definition of the word
"banker".
5 Omitted by Act 53 of 1952, s. 16 (w.e.f. 14-2-1956).
Extended to Laccadive Minicoy and Amindivi Islands (w.e.f. 1-10-1967):
vide Reg. 8 of 1965, s. 3 & Sch.
Extended to Goa, Daman and Diu with modifications, by Reg. 12 of 1962
s. 3 & Sch.
Extended to and brought into force in Dadra and Nagar Haveli (w.e.f.
1-7-65) by Reg. 6 of 1963, s. 2 and Such. I.
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12
CHAP
OF NOTES, BILLS AND CHEQUES
OF NOTES, BILLS AND CHEQUES
4.
"Promissory note".

3. 4. "Promissory note". A " promissory note" is an instrument in
writing (not being a bank-note or a currency-note) containing an
unconditional undertaking, signed by the maker, to pay a certain sum
of money only to, or to the order of, a certain person, or to the
bearer of the instrument.
Illustrations
A signs instruments in the following terms
(a) "I promise to pay B or order Rs. 500."
(b) " I acknowledge myself to be indebted to B in Rs. 1,000
to be paid on demand, for value received."
(c) Mr. B, O U Rs. 1,000."
(d) I promise to pay B Rs. 500 and all other sums which
shall be due to him."
(e) I promise to pay B Rs. 500, first deducting thereout
any money which he may owe me."
(f) " I promise to pay B Rs. 500 seven days after my
marriage with C."
(g) " I promise to pay B Rs. 500 on D's death, provided D
leaves me enough to pay that sum."
(h) " I promise to pay B Rs. 500 and to deliver to him my
black horse on 1st January next."
The instruments respectively marked (a) and (b) are promissory
notes. The instruments respectively marked (c), (d), (e), (f), (g)
and (h) are not promissory notes.
5.
"Bill of exchange".
5."Bill of exchange". A "bill of exchange" is an instrument in
writing, containing an unconditional order, signed by the maker,
directing a certain person to pay a certain sum of money only to, or
to the order of, a certain person or to the bearer of the instrument.
A promise or order to pay is not " conditional ", within the
meaning of this section and section 4, by reason of the time for
payment of the amount or any instalment thereof being expressed to be
on ,the lapse of a certain period after the occurrence of a specified
event which, according to the ordinary expectation of mankind, is
certain to happen, although the time of its happening may be
uncertain.

4. The sum payable may be "certain", within the meaning of this
section and section 4, although it includes future interest or is pay-
able at an indicated rate of exchange, or is according to the course
of exchange, and although the instrument provides that, on default of
payment of an instalment, the balance unpaid shall become due.
The person to whom it is clear that the direction is given or
that payment is to be made may be a "certain I person", within the
13
meaning of this section and section 4, although he is mis-named or
designated by description only.
6.
"Cheque".
6."Cheque". A "cheque" is a bill of exchange drawn on a specified
banker and not expressed to be payable otherwise than on demand.
7.
Drawer, Drawee.
7.Drawer, Drawee. The maker of a bill of exchange or cheque is
called the drawer "; the person thereby directed to pay is called the
" drawee" .
Drawee in case of need. When in the bill or in any endorsement
thereon the name of any person is given in addition to the drawee to
be resorted to in case of need, such person is called a " drawee in
case of need ".
Acceptor. After the drawee of a bill has signed his assent upon
the bill, or, if there are more parts thereof than one, upon one of
such parts, and delivered the same, or given notice of such signing to
the holder or to some person on his behalf, he is called the "
acceptor ".
Acceptor for honour.1[When a bill of exchange has been noted or
protested for nonacceptance or for better security,] and any person
accepts it supra protest for honour of the drawer or of any one of the
endorsers , such person is called an " acceptor for honour ".
Payee. The person named in the instrument, to whom or to whose
order the money is by the instrument directed to be paid, is called
the "payee".

5. 8.
"Holder".
8."Holder". The " holder" of a promissory note, bill of exchange
or cheque means any person entitled in his own name to the possession
thereof and to receive or recover the amount due thereon from the
parties thereto.
Where the note, bill or cheque is lost or destroyed, its holder
is the person so entitled at the time of such loss or destruction.
9.
"Holder in due course".
9.Holder in due course. " Holder in due course " means any person
who for consideration became the possessor of a promissory note, bill
of exchange or cheque if payable to bearer, or the payee or indorsee
thereof, if 2[payable to order,]
before the amount mentioned in it became payable, and without
having sufficient cause to believe that any defect existed in the
title of the person from whom he derived his title.
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1 Subs. by Act 2 of 1885, s. 2, for " When acceptance is refused and
the bill is protested for non-acceptance".
2 Subs. by Act 8 of 1919, s. 2, for " payable to, or to the order of,
a payee,".
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14
10.
"Payment in due course".
10."Payment in due course". "Payment in due course" means payment
in accordance with the apparent tenor of the instrument in good faith
and without negligence to any person in possession thereof under
circumstances which do not afford a reasonable ground for believing
that he is not entitled to receive payment of the amount therein
mentioned.
11.
Inland instrument.

6. 11.Inland instrument. A promissory note, bill of exchange or
cheque drawn or made in 1 [India], and made payable in, or drawn upon
any person resident in, 1 [India] shall be deemed to be an inland
instrument.
12.
Foreign instrument.
12.Foreign instrument. Any such instrument not so drawn, made or
made payable shall be deemed to be a foreign instrument.
13.
Negotiable instrument.
13.2[(1)Negotiable instrument. A " negotiable instrument "
means a promissory note, bill of exchange or cheque payable either to
order or to bearer.
Explanation (i).-A promissory note, bill of exchange or cheque is
payable to order which is expressed to be so payable or which is
expressed to be payable to a particular person, and does not contain
words prohibiting transfer or indicating an intention that it shall
not be transferable.
Explanation (ii).-A promissory note, bill of exchange or cheque
is payable to bearer which is expressed to be so payable or on which
the only or last endorsement is an endorsement in blank.
Explanation (iii).-Where a promissory note, bill of exchange or
cheque, either originally or by endorsement, is expressed to be pay-
able to the order of a specified person, and not to him or his order,
it is nevertheless payable to him or his order at his option.]
3[(2) A negotiable instrument may be made payable to two or more
payees jointly, or it may be made payable in the alternative to one of
two, or one or -some of several payees.]
14.
Negotiation.
14.Negotiation. When a promissory note, bill of exchange or
cheque
is transferred to any person, so as to constitute that person the
holder thereof, the instrument is said to be negotiated.

7. 15.
Indorsement.
15.Indorsement. When the maker or holder of a negotiable
instrument signs the same, otherwise than as such maker, for the
purpose of negotiation, on the back or face thereof or on a slip of
paper annexed thereto, or so signs for the same purpose a stamped
paper intended
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1 Subs. by Act 36 of 1957, s. 3 and Sch. II, for " a State".
2 Subs. by Act 8 of 1919, s. 3, for the original sub-section.
3 Ins. by Act 5 of 1914, s. 2.
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15
to be completed as a negotiable instrument, he is said to indorse the
same, -and is called the " indorser ".
16.
Indorsement in "blank" and "in full".
16.1[(1)] Indorsement in "blank" and "in full". If the indorser
signs his name only, the indorsement is said to be " in blank," and if
he adds a direction to pay the amount mentioned in the instrument to,
or to the order of, a specified person, the indorsement is said to be
" in full " ; and the person so specified is called the " indorsee "
of the instrument.
1[(2)Indorsee. The provisions of this Act relating to a payee
shall apply with the necessary modifications to an indorsee.]
17.
Ambiguous instruments.
17.Ambiguous instruments. Where an instrument may be construed
either as a promissory note or bill of exchange, the holder may at his
election treat it as either, and the instrument shall be thenceforward
treated accordingly.

8. 18.
Where amount is stated differently in figures and words.
18.Where amount is stated differently in figures and words. If
the amount undertaken or ordered to be paid is stated differently in
figures and in words, the amount stated in words shall be the amount
undertaken or ordered to be paid.
19.
Instruments payable on demand.
19.Instruments payable on demand. A promissory note or bill of
exchange, in which no time for payment is specified, and a cheque, are
payable on demand.
20.
Inchoate stamped instruments.
20.Inchoate stamped instruments. Where one person signs and
delivers to another a paper stamped in accordance with the law
relating to negotiable instruments then in force in 2[India], and
either wholly blank or having written thereon an incomplete negotiable
instrument, he thereby gives prima facie authority to the holder
thereof to make or complete, as the case may be, upon it a negotiable
instrument, for any amount specified therein and not exceeding the
amount covered by the stamp. The person so signing shall be liable
upon such instrument, in the capacity in which he signed the same, to
any holder in due course for such amount: provided that no person
other than a holder in due course shall recover from the person
delivering the instrument any thing in excess of the amount intended
by him to be paid thereunder.
21.
"At sight". "On presentment".
21. "At sight". "On presentment". In a promissory note or bill of
exchange the expressions " at sight " and " on presentment " mean
on
demand. The expression
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1 Ins. by Act 5 of 1914, s. 3.
2 Subs. by Act 3 of 1951, s. 3 and Sch., for "the States".
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9. 16
"after sight " means, in a promissory note, after presentment for
sight, and, in a bill of exchange, after acceptance, or noting for
nonacceptance, or protest for non-acceptance.
22.
"Maturity"
22. "Maturity". The maturity of a promissory note or bill of
exchange is the date at which it falls due.
Days of grace. Every promissory note or bill of exchange which is
not expressed to be payable on demand, at sight or on presentment is
at maturity on the third day after the day on which it is expressed to
be payable.
23.
Calculating maturity of bill or note payable so many months
afterdate or
sight.
23. Calculating maturity of bill or note payable so many
months after date or sight. In calculating the date at which a
promissory note or bill of exchange, made payable a stated number of
months after date or after sight, or after a certain event, is at
maturity, the period stated shall be held to terminate on the day of
the month which corresponds with the day on which the instrument is
dated, or presented for acceptance or sight, or noted for non-
acceptance, or protested for nonacceptance, or the event happens, or,
where the instrument is a bill of exchange made payable a stated
number of months after sight and has been accepted for honour, with
the day on which it was so accepted. If the month in which the period
would terminate has no corresponding day, the period shall be held to
terminate on the last day of such month.
Illustrations
(a) A negotiable instrument, dated 29th January 1878, is made
payable at one month after date. The instrument is at maturity on the
third day after the 28th February 1878.
(b) A negotiable instrument, dated 30th August 1878, is made
payable three months after date. The instrument is at maturity on the
3rd December 1878.
(c) A promissory note or bill of exchange, dated 31st August
1878, is made payable three months after date. The instrument is at
maturity on the 3rd December ,1878.

10. 24.
Calculating maturity of bill or note payable so many days after
dateor sight.
24. Calculating maturity of bill or note payable so many days
after date or sight. In calculating the date at which a promissory
note or bill of exchange made payable a certain number of days after
date or after sight or after a certain event is at maturity, the day
of the date, or of presentment for acceptance or sight, or of protest
for non-acceptance, or on which the event happens, shall be excluded.
25.
When day of maturity is a holdiay.
25. When day of maturity is a holdiay.When the day on which a
promissory note or bill of exchange is at maturity is a public
holiday, the instrument shall be deemed to be due on the next
preceding business day.
17
Explanation.-The expression " public holiday " includes Sundays:
1** * and any other day declared by the 2[Central Government], by
notification in the Official Gazette, to be a public holiday.
CHAP
PARTIES To NOTES, BILLS AND CHEQUES
CHAPTER III
PARTIES To NOTES, BILLS AND CHEQUES
26.
Capacity to make, etc., promissory notes, etc.
26. Capacity to make, etc., promissory notes, etc.Every person
capable of contracting, according to the law to which he is subject,
may bind himself and be bound by the making, drawing, acceptance,
indorsement, delivery and negotiation of a promissory note, bill of

11. exchange or cheque.
Minor. A minor may draw, indorse, deliver and negotiate such ins-
trument so as to bind all parties except himself.
Nothing herein contained shall be deemed to empower a corporation
to make, indorse or accept such instruments except in cases in which,
under the law for the time being in force, they are so empowered.
27.
Agency.
27. Agency. Every person capable of binding himself or of being
bound, as mentioned in section 26, may so bind himself or be bound by
a duly authorized agent acting in his name.
A general authority to transact business and to receive and dis-
charge debts does not confer upon an agent the power of accepting or
indorsing bills of exchange so as to bind his principal.
An authority to draw bills of exchange does not of itself import
an authority to indorse.
28.
Liability of agent signing.
28. Liability of agent signing. An agent who signs his name to a
promissory note, bill of exchange or cheque without indicating thereon
that he signs as agent, or that he does not intend thereby to incur
personal responsibility, is liable personally on the instrument,
except to those who induced him to sign upon the belief that the
principal only would be held liable.
29.
Liability of legal representative signing.
29. Liability of legal representative signing.A legal
representative of a deceased person who signs his name to a promissory
note., bill of exchange or cheque is liable
----------------------------------------------------------------------
1 The words "New Year's day, Christmas day: if either of such days
falls on a Sunday, the next following Monday ; Good-Friday;" omitted
by Act 37 of 1955, s. 3 (w.e.f. 1-4-1956).
2 Subs. by the A.O. 1937, for "L.G.".
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12. 18
personally thereon unless he expressly limits his liability to the
extent of the assets received by him as such.
30.
Liability of drawer.
30.Liability of drawer. The drawer of a bill of exchange or
cheque is bound, in case of dishonour by the drawee or acceptor
thereof, to compensate tile holder, provided due notice of dishonour
has been given to, or received by, the drawer as hereinafter provided.
31.
Liability of drawee of cheque.
31. Liability of drawee of cheque. The drawee of a cheque having
sufficient funds of the drawer in his hands properly applicable to the
payment of such cheque must pay the cheque when duly required so to
do, and, in. default of such payment, must compensate the drawer for
any loss or damage caused by such default.
32.
Liability of maker of note and acceptor of bill.
32. Liability of maker of note and acceptor of bill. In the
absence of a contract to the contrary, the maker of a promissory note
and the acceptor before maturity of a bill of exchange are bound to
pay the amount thereof at maturity according to the apparent tenor of
the note or acceptance respectively, and the acceptor of a bill of
exchange at or after maturity is bound to pay the amount thereof to
the holder on demand.
In default of such payment as aforesaid, such maker or acceptor
is bound to compensate any party to the note or bill for any loss or
damage sustained by him and caused by such default.
33.
Only drawee can be acceptor except in need or for honour.

13. 33.Only drawee can be acceptor except in need or for honour. No
person except the drawee of a bill of exchange, or all or some of
several drawees, or a person named therein as a drawee in case of
need, or an acceptor for honour, can bind himself by an acceptance.
34.
Acceptance by several drawees not partners.
34. Acceptance by several drawees not partners. Where there are
several drawees of a bill of exchange who are not partners, each of
them can accept it for himself, but none of them can accept it for
another without his authority.
35.
Liability of indorser.
35. Liability of indorser. In the absence of a contract to the
contrary, whoever indorses and delivers a negotiable instrument before
maturity without, in such indorsement, expressly excluding or making
conditional his own liability, is bound thereby to every subsequent
holder, in case of dishonour by the drawee, acceptor or maker, to
compensate such holder for any loss or damage caused to him by such
dishonour, provided due notice of dishonour has been given to, or
received by, such indorser as hereinafter provided.
19
Every indorser after dishonour is liable as upon an instrument
payable on demand.
36.
Liability of prior parties to holder in due course.
36. Liability of prior parties to holder in due course.Every
prior party to a negotiable instrument is liable thereon to a holder
in due course until the instrument is duly satisfied.
37.
Maker, drawer and acceptor principals.
37. Maker, drawer and acceptor principals. The maker of a
promissory note or cheque, the drawer of a bill of exchange until
acceptance, and the acceptor are, in the absence of a contract to the
contrary, respectively liable thereon as principal debtors, and the

14. other parties thereto are liable thereon as sureties for the maker,
drawer or acceptor, as the case may be.
38.
Prior party a principal in respect of each subsequent party.
38. Prior party a principal in respect of each subsequent
party.As between the parties so liable as sureties, each prior party
is, in the absence of a contract to the contrary, also liable thereon
as a principal debtor in respect of each subsequent party.
Illustration
A draws a bill payable to his own order on B, who accepts. A
afterwards indorses the bill to C, C to D, and D to E. As between E
and B, B is the principal debtor, and A, C and D are his sureties. As
between E and A, A is the principal debtor, and C and D are his
sureties. As between E and C, C is the principal debtor and D is his
surety.
39.
Suretyship.
39. Suretyship.When the holder of an accepted bill of exchange
enters into any contract with the acceptor which, under section 134 or
135 of the Indian Contract Act, 1872,(9 of 1872) would discharge the
other parties, the holder may expressly reserve his right to charge
the other parties, and in such case they are not discharged.
40
Discharge of indorser's liability.
40. Discharge of indorser's liability. Where the holder of a
negotiable instrument, without the consent of the indorser, destroys
or impairs the indorser's remedy against a prior party, the indorser
is discharged from liability to the holder to the same extent as if
the instrument had been paid at maturity.
Illustration
A is the holder of a bill of exchange made payable to the order
of B, which contains the following indorsements in blank:-
First indorsement, " B."
Second indorsement, " Peter Williams."

15. Third indorsement, " Wright & Co."
Fourth indorsement, " John Rozario."
This bill A puts in suit against John Rozario and strikes out,
without John Rozario's consent, the indorsements by Peter Williams and
Wright & Co. A is not entitled to recover anything from John Rozario.
20
41.
Acceptor bound,although, indorsement forged.
41.Acceptor bound,although, indorsement forged. An acceptor of a
bill of exchange already indorsed is not relieved from liability by
reason that such indorsement is forged, if lie knew or had reason to
believe the indorsement to be forged when he accepted the bill.
42.
Acceptance of bill drawn in fictitious name.
42.Acceptance of bill drawn in fictitious name. An acceptor of a
bill of exchange drawn in a fictitious name and payable to the
drawer's order is not, by reason that such name is fictitious,
relieved from liability to any holder in due course claiming under an
indorsement by the same hand as the drawer's signature, and purporting
to be made by the drawer.
43.
Negotiable instrument made, etc., without consideration.
43.Negotiable instrument made, etc., without consideration. A
negotiable instrument made, drawn, accepted, indorsed or transferred
without consideration, or for a consideration which fails, creates no
obligation of payment between the parties to the transaction. But if
any such party has transferred the instrument with or without
indorsement to a holder for consideration, such holder, and every
subsequent holder deriving title from him, may recover the amount due
on such instrument from the transferor for consideration or any prior
party thereto.

16. Exception I.-No party for whose accommodation a negotiable
instrument has been made, drawn, accepted or indorsed can, if he have
paid the amount thereof, recover thereon such amount from any person
who became a party to such instrument for his accommodation.
Exception II.-No party to the instrument who has induced any
other party to make, draw, accept, indorse or transfer the same to him
for a consideration which he has failed to pay or perform in full
shall recover thereon an amount exceeding the value of the considera-
tion (if any) which he has actually paid or performed.
44.
Partial absence or failure of moneyconsideration.
44. Partial absence or failure of moneyconsideration. When the
consideration for which a person signed a promissory note, bill of
exchange or cheque consisted of money, and was originally absent in
part or has subsequently failed in part, the sum which a holder
standing in immediate relation with such signer is entitled to receive
from him is proportionally reduced.
Explanation.-The drawer of a bill of exchange stands in immediate
relation with the acceptor. The maker of a promissory note, bill of
exchange or cheque stands in immediate relation with the payee, and
the indorser with his indorsee. Other signers may by agreement stand
in immediate relation with a holder.
21
Illustration
A draws a bill on B for Rs. 500 payable to the order of A. B
accepts the bill, but subsequently dishonours it by non-payment. A
sues B on the bill, B proves that it was accepted for value as to Rs.
400, and as an accommodation to the plaintiff as to the residue. A
can only recover Rs. 400.
45.
Partial failure of consideration not consisting of money.
45.Partial failure of consideration not consisting of money.
Where a part of the consideration for which a person signed a
promissory note, bill of exchange or cheque, though not consisting of
money, is ascertainable in money without collateral enquiry, and there

17. has been a failure of that part, the sum which a holder standing in
immediate relation with such signer is entitled to receive from him is
proportionally reduced.
1[45
Holder's right to duplicate of lost bill.
1[45A.Holder's right to duplicate of lost bill. Where a bill of
exchange has been lost before it is over-due, the person who was the
holder of it may apply to the drawer to give him another bill of the
same tenor, giving security to the drawer, if required, to indemnify
him against all persons whatever in case the bill alleged to have been
lost shall be found again.
If the drawer on request as aforesaid refuses to give such
duplicate bill, he may be compelled to do so.]
CHAP
OF NEGOTIATION
CHAPTER IV
OF NEGOTIATION
46.
46.Delivery. The making, acceptance or indorsement of a
promissory note, bill of exchange or cheque is completed by delivery,
actual or constructive.
As between parties standing in immediate relation, delivery to be
effectual must be made by the party making, accepting or indorsing the
instrument, or by a person authorized by him in that behalf.
As between such parties and any holder of the instrument other
than a holder in due course, it may be shown that the instrument was
delivered conditionally or for a special purpose only, and not for the
purpose of transferring absolutely the property therein.
A promissory note, bill of exchange or cheque payable to bearer
is negotiable by the delivery thereof.
A promissory note, bill of exchange or cheque payable to order is
negotiable by the holder by indorsement and delivery thereof.
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1 Ins. by Act 2 of 1885, s. 3.

18. ---------------------------------------------------------------------
22
47.
Negotiations by delivery.
47. Negotiations by delivery. Subject to the provisions of
section 58, a promissory note, bill of exchange or cheque payable to
bearer is negotiable by delivery thereof.
Exception.-A promissory note, bill of exchange or cheque
delivered on condition that it is not to take effect except in a
certain event is not negotiable (except in the hands of a holder for
value without notice of the condition) unless such event happens.
Illustrations
(a) A, the holder of a negotiable instrument payable to
bearer, delivers it to B's agent to keep for B. The instrument has
been negotiated.
(b) A, the holder of a negotiable instrument payable to
bearer, which is in the hands of A's banker, who is at the time the
banker of B, directs the banker to transfer the instrument to B's
credit in the banker's account with B. The banker does so, and
accordingly now possesses the instrument as B's agent. The instrument
has been negotiated, and B has become the holder of it.
48.
Negotiation by indorsement.
48. Negotiation by indorsement. Subject to the provisions of
section 58, a promissory note, bill of exchange or cheque 1[payable to
order,] is negotiable by the holder by indorsement and delivery
thereof.
49.
Conversion of indorsement in blank into indorsement in full.
49.Conversion of indorsement in blank into indorsement in full.
The holder of a negotiable instrument indorsed in blank may, without
signing his own name, by writing above the indorser's signature a
direction to pay to any other person as indorsee, convert the
indorsement in blank into an indorsement in full; and the holder does

19. not thereby incur the responsibility of an indorser.
50.
Effect of indorsement.
50. Effect of indorsement. The indorsement of a negotiable
instrument followed by delivery transfers to the indorsee the property
therein with the right of further negotiation;but the indorsement may,
by express words, restrict or exclude such right, or may merely
constitute the indorsee an agent to indorse the instrument, or to
reeive its contents for the indorser, or for some other specified
person.
Illustrations
B signs the following indorsements on different negotiable
instruments payable to bearer:-
(a) "Pay the contents to C only".
(b) "Pay C for my use."
(c) "Pay C or order for the account of B".
(d) "The within must be credited to C".
---------------------------------------------------------------------
1 Subs. by Act 8 of 1919, s. 4, for "payable to the order of a
specified person, or to a specified person or order,".
----------------------------------------------------------------------
23
.lm10
These indorsements exclude the right of further negotiation by C.
(e) "Pay C."
(f) "Pay C value in account with the Oriental Bank."
(g)Pay the contents to C, being part of the consideration in a
certain deed of assignment executed by C to the indorser and others."
These indorsements do not exclude the right of further negotiation by
C.
51.

20. Who may negotiate.
51.Who may negotiate. Every sole maker, drawer, payees or
indorsee, or all of several joint makers, drawers, payees or
indorsees, of a negotiable instrument may, if the negotiability of
such instrument has not been restricted or excluded as mentioned in
section 50, indorse and negotiate the same.
Explanation.-Nothing in this section enables a maker or drawer to
indorse or negotiate an instrument, unless he is in lawful possession
or is holder thereof ; or enables a payee or indorsee to indorse or
negotiate an instrument, unless he is holder thereof.
Illustration
A bill is drawn payable to A or order. A indorses it to B, the
indoresement not containing the words " or order " or any equivalent
words. B may negotiate the instrument.
52.
Indorser who excluds his own liability or makes it conditional.
52.Indorser who excluds his own liability or makes it
conditional. The indorser of a negotiable instrument may, by express
words in the indorsement, exclude his own liability thereon, or make
such liability or the right of the indorsee to receive the amount due
thereon depend upon the happening of a specified event, although such
event may never happen.
Where an indorser so excludes his liability and afterwards
becomes the holder of the instrument, all intermediate indorsers are
liable to him.
Illustrations
(a) The indorser of a negotiable instrument signs his name, adding
the words-" Without recourse."
Upon this indorsement he incurs no liability.
(b) A is the payee and holder of a negotiable instrument.
Excluding personal liability by an indorsement " without recourse," he
transfers the instrument to B, and B indorses it to C, who indorses it
to A. A is not only reinstated in his former rights, but has the
rights of an indorsee against B and C.
53.
Holder deriving title from holder in due course.

21. 53.Holder deriving title from holder in due course. A holder of a
negotiable instrument who derives title from a holder in due course
has the rights thereon of that holder in due course.
24
54.
Instrument indorsed in blank.
54.Instrument indorsed in blank. Subject to the provisions
hereinafter contained as to crossed cheques, a negotiable instrument
indorsed in blank is payable to the bearer thereof even although
originally payable to order.
55.
Conversion of indorsement in blank into indorsement in full.
55.Conversion of indorsement in blank into indorsement in full.
If a negotiable instrument, after having been indorsed in blank, is
indorsed in full, the amount of it cannot be claimed from the indorser
in full, except by the person to whom it has been indorsed in full, or
by one who derives title through such person.
56.
Indorsement for part of sum due.
56.Indorsement for part of sum due. No writing on a negotiable
instrument is valid for the purpose of negotiation if such writing
purports to transfer only a part of the amount appearing to be due on
the instrument; but where such amount has been partly paid, a note to
that effect may be indorsed on the instrument, which may then be
negotiated for the balance.
57.
Legal re-presentative cannot by delivery only negotiate
instrumentindorsed
by deceased.
57.Legal re-presentative cannot by delivery only negotiate

22. instrument indorsed by deceased. The legal representative of a
deceased person cannot negotiate by delivery only a promissory note,
bill of exchange or cheque payable to order and indorsed by the
deceased but not delivered,
58.
Instrument obtained by unlawful means or for unlawful consideration.
58.Instrument obtained by unlawful means or for unlawful
consideration. When a negotiable instrument has been lost, or has been
obtained from any maker, acceptor or holder thereof by means of an
offence or fraud, or for an unlawful consideration, no possessor or
indorsee who claims through the person who found or so obtained the
instrument is entitled to receive the amount due thereon from such
maker, acceptor or holder, or from any party prior to such holder,
unless such possessor or indorsee is, or some person through whom he
claims was, a holder thereof in due course.
59.
Instrument acquired after dishonour or when overdue.
59.Instrument acquired after dishonour or when overdue. The
holder of a negotiable instrument, who has acquired it after
dishonour, whether by non-acceptance or non-payment, with notice
thereof, or after maturity, has only, as against the other parties,
the rights thereon of his transferor:
Accommodation note or bill. Provided that any person who, in good
faith and for consideration, becomes the holder, after maturity, of a
promissory note or bill of exchange made, drawn or accepted without
consideration, for the purpose of enabling some party thereto to raise
money thereon, may recover the amount of the note or bill from any
prior party.
25
Illustration
The acceptor of a bill of exchange, when he accepted it,
deposited with the drawer certain goods as a collateral security for
the payment of the bill, with power to the drawer to sell the goods
and apply the proceeds in discharge of the bill if it were not paid at
maturity. The bill not having been paid at maturity, the drawer sold
the _goods and retained the proceeds, but indorsed the bill to A. A's

23. title is subject to the same objection as the drawer's title.
60.
Instrument negotiable till payment or satisfaction.
60.Instrument negotiable till payment or satisfaction. A
negotiable instrument may be negotiated (except by the maker, drawee
or acceptor after maturity) until payment or satisfaction thereof by
the maker, drawee or acceptor at or after maturity, but not after such
payment or satisfaction.
CHAP
OF PRESENTMENT
CHAPTER V
OF PRESENTMENT
61.
Presentment for acceptance.
61.Presentment for acceptance. A bill of exchange payable after
sight must, if no time or place is specified therein for presentment,
be presented to the drawee thereof for acceptance, if he can, after
reasonable search, be found, by a person entitled to demand
acceptance, within a reasonable time after it is drawn, and in
business hours on a business day. In default of such presentment, no
party thereto is liable thereon to the person making such default.
If the drawee cannot, after reasonable search, be found, the bill
is dishonoured.
If the bill is directed to the drawee at a particular place, it
must be presented at that place; and if at the due date for
presentment he cannot, after reasonable search, be found there, the
bill is dishonoured.
1[Where authorized by agreement or usage, a presentment through
the post office by means of a registered letter is sufficient.]
62.

24. Presentment of promissory note for sight.
62.Presentment of promissory note for sight. A promissory note,
payable at a certain period after sight, must be presented to the
maker thereof for sight (if he can after reasonable search be found)
by a person entitled to demand payment, within a reasonable time after
it is made and in business hours on a business day. In default of
such presentment, no party thereto is liable thereon to the person
making such default.
---------------------------------------------------------------------
1 Ins. by Act 2 of 1885, s. 4.
---------------------------------------------------------------------
26
63.
Drawee's time for deliberation .
63.Drawee's time for deliberation . The holder must, if so
required by the drawee of a bill of exchange presented to him for
acceptance, allow the drawee 1[forty-eight] hours (exclusive of
public
holidays) to consider whether he will accept it.
64.
Presentment for payment.
64.Presentment for payment. Promissory notes,-bills of exchange
and cheques must be presented for payment to the maker, acceptor or
drawee thereof respectively, by or on behalf of the holder as
hereinafter provided. In default of such presentment, the other
parties thereto are not liable thereon to such holder.
2[Where authorized by agreement or usage, a presentment through
the post office by means of a registered letter is sufficient.]
Exception.-Where a promissory note is payable on demand and is
not payable at a specified place, no presentment is necessary in order
to charge the maker thereof.
65.
Hours for presentment.
65.Hours for presentment. Presentment for payment must be made

25. during the usual hours of business, and, if at a banker's, within
banking hours.
66.
Presentment for payment of instrument payable after date or sight.
66.Presentment for payment of instrument payable after date or
sight. A promissory. note or bill of exchange, made payable at a
specified period after date or sight thereof, must be presented for
payment at maturity.
67.
Presentment for payment of promissory note payable by instalments.
67.Presentment for payment of promissory note payable by
instalments. A promissory note payable by instalments must be
presented for payment on the third day after the date fixed for
payment of each instalment; and non-payment on such presentment has
the same effect as non-payment of a note at maturity.
68.
Presentment for payment of instrument payable at specified place
andnot else
where.
68.Presentment for payment of instrument payable at specified
place and not else where. A promissory note, bill of exchange or
cheque made, drawn or accepted payable at a specified place and not
elsewhere must, in order to charge any party thereto, be presented for
payment at that place.
69.
Instrument payable at specified place.
69.Instrument payable at specified place.A promissory note or
bill of exchange made, drawn or accepted payable at a specified place
must, in order to charge the maker or drawer thereof, be presented for
payment at that place.
---------------------------------------------------------------------
1 Subs. by Act 12 of 1921, s. 2, for " twenty-four".

26. 2 Ins. by Act 2 of 1885, s. 4.
---------------------------------------------------------------------
27
70.
Presentment where no exclusive place specified.
70.Presentment where no exclusive place specified. A promissory
note or bill of exchange, not made payable as mentioned in sections 68
and 69, must be presented for payment at the place of business (if
any), or. at the usual residence, of the maker, drawee or acceptor
thereof, as the case may be.
71.
Presentment when maker, etc.,has no known place of business
orresidence.
71.Presentment when maker, etc.,has no known place of business or
residence. If the maker, drawee or acceptor of a negotiable instrument
has no known place of business or fixed residence, and no place is
specified in the instrument for presentment for acceptance or payment.
such presentment may be made to him' in person wherever be can be
found.
72.
Presentment of cheque to charge drawer.
72.Presentment of cheque to charge drawer. 1[Subject to the
provisions of section 84,] a cheque must, in order to charge the
drawer, be presented at the bank upon which it is drawn before the
relation between the drawer and his banker has been altered to the
prejudice of the drawer.
73.
Presentment of cheque to charge any other person.
73.Presentment of cheque to charge any other person. A cheque

27. must, in order to charge any person except the drawer, be presented
within a reasonable time after delivery thereof by such person.
74.
Presentment of instrument payable on demand.
74.Presentment of instrument payable on demand. Subject to the
provisions of section 31, a negotiable instrument payable on demand
must be presented for payment within a reasonable time after it is
received by the holder.
75.
Presentment by or to agent, re-presentative of deceased, or
assigneeof
insolvent.
75.Presentment by or to agent, re-presentative of deceased, or
assignee of insolvent. Presentment for acceptance or payment may be
made to the duly authorized agent of the drawee, maker or acceptor, as
the case may be, or, where the drawee, maker or acceptor has died, to
his legal representative, or, where he has been declared an insolvent,
to his assignee.
2[75
Excuse for delay in presentment for acceptance or payment.
2[75A.Excuse for delay in presentment for acceptance or payment.
Delay in presentment 2[for acceptance or payment] is excused if the
delay is caused by circumstances beyond the control of the holder, and
not imputable to his default, misconduct or negligence. When the
cause of delay ceases to operate, presentment must be made within a
reasonable time.]
---------------------------------------------------------------------
1 Ins. by Act 6 of 1897, s. 2.
2 Ins. by Act 25 of 1920, s. 2.
3 Subs. by Act 12 of 1921, s. 3, for "for payment".
---------------------------------------------------------------------
28

28. 76.
When presentment unnecessary.
76.When presentment unnecessary. No presentment for payment is
necessary, and the instrument is dishonoured at the due date for
presentment, in any of the following cases: -
(a) if the maker, drawee or acceptor intentionally prevents
the presentment of the instrument, or,
if the instrument being payable at his place of business, he
closes such place on a business day during the usual business
hours, or,
if the instrument being payable at some other specified
place, neither he nor any person authorized to pay it attends
at such place during the usual business hours, or,
if the instrument not being payable at any specified place,
he cannot after due search be found ;
(b) as against any party sought to be charged therewith, if
he has engaged to pay notwithstanding non-presentment;
(c) as against any party if, after maturity, with knowledge
that the instrument has not been presented-
he makes a part payment on account of the amount due on the
instrument,
or promises to pay the amount due thereon in whole or in
part,
or otherwise waives his right to take advantage of any
default in presentment for payment;
(d) as against the drawer, if the drawer could not suffer
damage from the want of such presentment.
77.
Liability of banker for negligently dealing with bill presented
forpayment.
77.Liability of banker for negligently dealing with bill
presented for payment. When a bill of exchange, accepted payable at
a specified bank, has been duly presented there for payment and
dishonoured, if the banker so negligently or improperly keeps, deals

29. with or delivers back such bill as to cause loss to the holder, he
must compensate the holder for such loss.
CHAP
OF PAYMENT AND INTEREST
CHAPTER VI
OF PAYMENT AND INTEREST
78.
To whom payment should be made.
78.To whom payment should be made. Subject to the provisions of
section 82, clause (c), payment of the amount due on a promissory
note, bill of exchange or cheque must, in order to discharge the maker
or acceptor, be made to the holder of the instrument.
29
79.
Interest when rate specified.
79.Interest when rate specified. When interest at a specified
rate is expressly made payable on a promissory note or bill of
exchange, interest shall be calculated at the rate specified, on the
amount of the principal money due thereon, from the date of the
instrument, until tender or realization of such amount, or until such
date after the institution of a suit to recover such amount as the
Court directs.
80.
Interest when no rate specified.
80.Interest when no rate specified. When no rate of interest is
specified in the instrument, interest on the amount due thereon shall,
1[notwithstanding any agreement relating to interest between any
parties to the instrument], be calculated at the rate of 2[eighteen
per
annum,] from the date at which the same ought to have been paid by the

30. party Charge, until tender or realization of the amount due thereon,
or until such date after the institution of a suit to recover such
amount as the Court directs.
Explanation.-When the party charged is the indorser of an instru-
ment dishonoured by non-payment, he is liable to pay interest only
from the time that he receives notice of the dishonour.
81.
Delivery of instrument on payment, or indemnity in case of loss.
81.Delivery of instrument on payment, or indemnity in case of
loss. Any person liable to pay, and called upon by the holder thereof
to pay, the amount due on a promissory note, bill of exchange or
cheque is before payment entitled to have it shown, and is on payment
entitled to have it delivered up, to him, or, if the instrument is
lost or cannot be produced, to be indemnified against any further
claim thereon against him.
CHAP
OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES
CHAPTER VII
OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES
82.
Discharge from liability--
82.Discharge from liability-- The maker, acceptor or indorser
respectively of a negotiable instrument is discharged from liability
thereon-
(a) by cancellation; to a holder thereof who cancels such
acceptor's or indorser's name with intent to discharge him,
and to all parties claiming under such holder;
(b) by release ; to a holder thereof who otherwise discharges
such maker, acceptor or indorser, and to all parties deriving
title under such holder after notice of such discharge;
---------------------------------------------------------------------

31. 1 Subs. by Act 30 of 1926, s. 2, for " except in cases provided for by
the Code of Civil Procedure, section 532".
2 Subs. by Act 66 of 1988, s. 2 (w.e.f. 30-12-1988).
---------------------------------------------------------------------
30
(c)by payment ,to all parties thereto, if the instrument is
payable to bearer, or has been indorsed in blank, and such
maker, acceptor or indorser makes payment in due course of
the amount due thereon.
83.
Discharge by allowing drawee more than forty-eight hours to accept.
83.Discharge by allowing drawee more than forty-eight hours to
accept. If the holder of a bill of exchange allows the drawee more
than 1[forty-eight] hours, exclusive of public holidays, to consider
whether he will accept the same, all previous parties not consenting
to such allowance are thereby discharged from liability to such
holder.
2[84
When cheque not duly presented and drawer damaged thereby.
2[84. (1) When cheque not duly presented and drawer damaged
thereby. Where a cheque is not presented for payment within a
reasonable time of its issue, and the drawer or person on whose
account it is drawn had the right, at the time when presentment ought
to have been made, as between himself and the banker, to have the
cheque paid and suffers actual damage through the delay, he is
discharged to the extent of such damage, that is to say, to the extent
to which such drawer or person is a creditor of the banker to a larger
amount than he would have been if such cheque had been paid.
(2) In determining what is a reasonable time, regard shall be
had to the nature of the instrument, the usage of trade and of
bankers, and the facts of the particular case.
(3) The holder of the cheque as to which such drawer or- person
is so discharged shall be a creditor, in lieu of such drawer or
person, of such banker to the extent of such discharge and entitled to
recover the amount from him.

32. Illustrations
(a) A draws a cheque for Rs. 1,000, and, when the cheque ought
to be presented, has funds at the bank to meet it. The bank fails
before the cheque is presented. The drawer is discharged, but the
holder can prove against the bank for the amount. of the cheque.
(b) A draws a cheque at Umballa on a bank in Calcutta. The bank
fails before the cheque could be presented in ordinary course. A is
not discharged, for he has not suffered actual damage through any
delay. in presenting the cheque.]
85.
Cheque payable to order.
85. 3[(1)] Cheque payable to order. Where a cheque payable to
order purports to be endorsed by or on behalf of the payee, the drawee
is discharged by payment in due course.
---------------------------------------------------------------------
1 Subs. by Act 12 of 1921, s. 2, for " twenty-four".
2 Subs. by Act 6 of 1897, s. 3, for the original section.
3 Renumbered as sub-section (1) of s. 85 by Act 17 of 1934, s. 2.
---------------------------------------------------------------------
31
1[(2) Where a cheque is originally expressed to be payable to bearer,
the -drawee is discharged by payment in due course to the bearer
thereof, notwithstanding any endorsement whether in full or in blank
appearing thereon, and notwithstanding that any such endorsement
purports to restrict or exclude further negotiation.]
2[85A.Drafts drawn by one branch of a bank on another payable to
order. Where any draft, that is, an order to pay money, drawn by one
office of a bank upon another office of the same bank for a sum of
money payable to order on demand, purports to be endorsed by or on
behalf of the payee, the bank is discharged by payment in due course.]
86.

33. Parties not consenting discharged by qualified or limited acceptance.
86. Parties not consenting discharged by qualified or limited
acceptance.If the holder of a bill of exchange acquiesces in a
qualified acceptance, or one limited to part of the sum mentioned in
the bill, or which substitutes a different place or time for payment,
or which, where the drawees are not partners, is not signed by all the
drawees, all previous parties whose consent is not obtained to such
acceptance are discharged as against the holder and those claiming
under him, unless on notice given by the holder they assent to such
acceptance.
Explanation.-An acceptance is qualified-
(a) where it is conditional, declaring the payment to be
dependent on the happening, of an event therein stated ;
(b) where it undertakes the payment of part only of the sum
ordered to be paid ;
(c) where, no place of payment being specified on the
order, it undertakes the payment at a specified place, and
not otherwise or elsewhere ; or where, a place of payment
being specified in the order, it undertakes the payment at
some other place and not otherwise or elsewhere;
(d) where it undertakes the payment at a time other than
that at which under the order it would be legally due.
87.
Effect of material alteration.
87.Effect of material alteration. Alteration by indorsee.Any
material alteration of a negotiable instrument renders the same void
as against any one who is a party thereto at the time of making such
alteration and does not consent thereto, unless it was made in order
to carry out the common intention of the original parties:
---------------------------------------------------------------------
1 Ins. by Act 17 of 1934, s. 2.
2 Ins. by Act 25 of 1930, s. 2.
---------------------------------------------------------------------
32

34. Alteration by indorsee. and any such alteration, if made by an indo-
rsee, discharges his indorser from all liability to him in respect
of the consideration thereof.
The provisions of this section are subject to those of
sections 20, 49, 86 and 125.
88.
Acceptor or indorser bound notwithstanding previous alteration.
88.Acceptor or indorser bound notwithstanding previous
alteration. An acceptor or indorser of a negotiable instrument is
bound by his acceptance or indorsement notwithstanding any previous
alteration of the instrument.
89.
Payment of instrument on which alteration is not apparent.
89.Payment of instrument on which alteration is not apparent.
Where a promissory note, bill of exchange or cheque has been
materially altered but does not appear to have been so altered, or
where a cheque is presented for payment which does not at the time of
presentation appear to be crossed or to have had a crossing which has
been obliterated, payment thereof by a person or banker liable to pay,
and paying the same according to the apparent tenor thereof at the
time of payment and otherwise in due course, shall discharge such
person or banker from all liability thereon ; and such payment shall
not be questioned by reason of the instrument having been altered or
the cheque crossed.
90.
Extinguishment of rights of action on bill in acceptor's hands.
90.Extinguishment of rights of action on bill in acceptor's
hands. If a bill of exchange which has been negotiated is, at or
after maturity, held by the acceptor in his own right, all rights of
action thereon are extinguished.
CHAP
OF NOTICE OF DISHONOUR

35. CHAPTER VIII
OF NOTICE OF DISHONOUR
91.
Dishonour by non-acceptance.
91.Dishonour by non-acceptance. A bill of exchange is said to be
dishonoured by non-acceptance when the drawee, or one of several
drawees not being partners, makes default in acceptance upon being
duly required to accept the bill, or where presentment is excused and
the bill is not accepted.
Where the drawee is incompetent to contract, or the acceptance
is' qualified, the bill may be treated -as dishnoured.
92.
Dishonour by non-payment.
92.Dishonour by non-payment. A promissory note, bill of exchange
or cheque is said to be dishonoured by non-payment when the maker of
the note, acceptor
33
of the bill or drawee of the cheque makes default in payment upon
being duly required to pay the same.
93.
By and to whom notice should be given.
93.By and to whom notice should be given. When a promissory note,
bill of exchange or cheque is dishonoured by non-acceptance or non-
payment, the holder thereof, or some party thereto who remains liable
thereon, must give notice that the instrument has been so dishonoured
to all other parties whom the holder seeks to make severally liable
thereon, and to some one of several parties whom he seeks to make
jointly liable thereon.
Nothing in this section renders it necessary to give notice to
the maker of the dishonoured promissory note or the drawee or acceptor
of the dishonoured bill of exchange or cheque.

36. 94.
Mode in which notice may be given.
94.Mode in which notice may be given. Notice of dishonour may be
given to a duly authorized agent of the person to whom it is required
to be given, or, where he has died, to his legal representative, or,
where he has been declared an insolvent, to his assignee ; may be oral
or written; may, if written, be sent by post; and may be in any form ;
but it must inform the party to whom it is given, either in express
terms or by reasonable intendment, that the instrument has been
dishonoured, and in what way, and that he Will be held liable thereon
; and it must be given within a reasonable time after dishonour, at
the place of business or (in case such party has no place of business)
at the residence of the party for whom it is intended.
If the notice is duly directed and sent by post and miscarries,
such miscarriage does not render the notice invalid.
95.
Party receiving must transmit notice of dishonour.
95.Party receiving must transmit notice of dishonour. Any party
receiving notice of dishonour must, in order to render any prior party
liable to himself, give notice of dishonour to such party within a
reasonable time, unless such party otherwise receives due notice as
provided by section 93.
96.
Agent for presentment.
96.Agent for presentment. When the instrument is deposited with
an agent for presentment, the agent is entitled to the same time to
give notice to his principal as if he were the holder giving notice of
dishonour, and the principal is entitled to a further like period to
give notice of dishonour.
97.
When party to whom notice given is dead.
97.When party to whom notice given is dead. When the party to
whom notice of dishonour is despatched is dead, but the party
despatching the notice is ignorant of his death the notice is
sufficient,

37. 34
98.
When notice of dishnour is unnecessary.
98.When notice of dishnour is unnecessary. No notice of dishonour
is necessary-
(a) when it is dispensed with by the party entitled
thereto;
(b) in order to charge the drawer when he has countermanded
payment;-
(c) when the party charged could not suffer damage for want
of notice;
(d) when the party entitled to notice cannot after due
search
be found ; or the party bound to give notice is, for any
other reason, unable without any fault of his own to give it;
(e) to charge the drawers, when the acceptor is also a
drawer;
(f)in the case of a promissory note which is not negotiable;
(g) when the party entitled to notice, knowing the facts,
promises unconditionally to pay the amount due on the
instrument.
CHAP
OF NOTING AND PROTEST
CHAPTER IX
OF NOTING AND PROTEST
99.
Noting.

38. 99.Noting. When a promissory note or bill of exchange ha s been
dishonoured by non-acceptance or non-payment, the holder may cause
such dishonour to be noted by a notary public upon the instrument, or
upon a paper attached thereto, or partly upon each.
Such note must be made within a reasonable time after dishonour,
and must specify the date of dishonour, the reason, if any, assigned
for such dishonour, or, if the instrument has not been expressly
dishonoured, the reason why the holder treats it as dishonoured, and
the notary's charges.
100.
Protest.
100.Protest. When a promissory note or bill of exchange has
been dishonoured by non-acceptance or non-payment, the holder may,
within a reasonable time, cause such dishonour to be noted and
certified by a notary public. Such certificate is called a protest.
Protest for better security. When the acceptor of a bill of
exchange has become insolvent, or his credit has been publicly
impeached, before the maturity of the bill, the holder may, within a
reasonable time, cause a notary public to demand better security of
the acceptor, and on its being refused may, within a reasonable time,
cause such facts to be noted and certified as aforesaid. Such
certificate is called a protest for better security.
35
101.
Contents of protest.
101.Contents of protest.A protest under section 100 must contain-
(a) either the instrument itself, or a literal transcript
of the
instrument and of everything written or printed thereupon;
(b) the name of the person for whom and against whom the
instrument has been protested ;
(c) astatement that payment or acceptance, or better
security, as the case may be, has been demanded of such
person by the notary public ; the terms of his answer, if
any, or a statement that he gave no answer or that he could

39. not be found ;
(d) when the note or bill has been dishonoured, the place
and
time of dishonour, and, when better security has been
refused, the place and time of refusal ;
(e) the subscription of the notary public making the
protest;
(f) in the event of an acceptance for honour or of a
payment for honour, the name of the person by whom, of the
person for whom, and the manner in which, such acceptance or
payment was offered and effected.
1[A notary public may make the demand mentioned in clause (c) of
this section either in person or by his clerk or, where authorized by
agreement or usage, by registered letter.]
102.
Notice ofprotest.
102.Protest for non-payement after dishonour by non-acceptacne.
When a promissory note or bill of exchange is required by law to be
protested, notice of such protest must be given instead of notice of
dishonour, in the same manner and subject to the same conditions ; but
the notice may be given by the notary public who makes the protest.
103.
Protest for non-payement after dishonour by non-acceptacne.
103.Protest for non-payement after dishonour by non-acceptacne.
All bills of exchange drawn payable at some other place than the place
mentioned as the residence of the drawee, and which are dishonoured by
non-acceptance, may, without further presentment to the drawee, be
protested for non-payment in the place specified for payment, unless
paid before or at maturity.
104.
Protest of foreign bills.
104.Protest of foreign bills. Foreign bills of exchange must be
protested for dishonour when such protest is required by the law of
the place where they are drawn.

40. ---------------------------------------------------------------------
1 Ins. by Act 2 of 1885, s. 5.
---------------------------------------------------------------------
36
1[104A.When noting equivalent to protest. For the purposes of
this Act, where a bill or note is required to be protested within a
specified time or before some further proceeding is taken, it is.
sufficient that the bill has been noted for protest before the
expiration of the specified time or the taking of the proceeding ; and
the formal protest may be extended at any time thereafter as of the
date of the noting.]
CHAP
OF REASONABLE TIME
CHAPTER X
OF REASONABLE TIME
105.
Reasonable time.
105.Reasonable time. In determining what is a reasonable time for
presentment for acceptance or payment, for giving notice of dishonour
and for noting, regard shall be had to the nature of the instrument
and the usual course of dealing with respect to similar instruments ;
and, in calculating such time, public holidays shall be excluded.
106.
Reasonable time of giving notice of dishonour.
106.Reasonable time of giving notice of dishonour. If the holder
and -the party to whom notice of dishonour is given carry on business
or live (as the case may be) in different places, such notice is given
within a reasonable time if it is despatched by the next post or on
the day next after the day of dishonour.
If the said parties carry on business or live in the same place,
such notice is given within a reasonable time if it is despatched in

41. time to reach its destination on the day next after the day of
dishonour.
107.
Reasonable time for transmitting such notice.
107.Reasonable time for transmitting such notice. A party
receiving notice of dishonour, who seeks to enforce his right against
a prior party, transmits the notice within a reasonable time -if he
transmits it within the same time after its receipt as he would have
had to give notice if he had been the holder.
CHAP
OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE OF NEED
CHAPTER XI
OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE
OF NEED
108.
Acceptancc for honour.
108.Acceptancc for honour. When a bill of exchange has been noted
or protested for nonacceptance or for better security, any person not
being a party already liable thereon may, with the consent of the
holder, by writing on the bill, accept the same for the honour of any
party thereto.2* * *
---------------------------------------------------------------------
1 Ins. by Act 2 of 1885, s. 6.
2 The second sentence rep. by s. 7, ibid.
---------------------------------------------------------------------
37
(Chapter XI.-of acceptance and payment for honour and reference in
case of need.)
109.
How acceptance for honour must be made.

42. 109.How acceptance for honour must be made. A person desiring to
accept for honour must, 1[by writing on the bill under his hand,]
declare that he accepts under protest the protested bill for the
honour of the drawer or of a particular indorser whom he names, or
generally for honour 2* * *.
110.
Acceptance not specifying for whose honour it is made.
110. Acceptance not specifying for whose honour it is made. Where
the acceptance does not express for whose honour it is made, it shall
be deemed to be made for the honour of the drawer.
111.
Liability of acceptor for honour.
111.Liability of acceptor for honour. An acceptor for honour
binds himself to all parties subsequent to the party for whose honour
he accepts to pay the amount of the bill if the drawee do not ; and
such party and all prior parties are liable in their respective
capacities to compensate the acceptor for honour for all loss or
damage sustained by him in consequence of such acceptance.
But an acceptor for honour is not liable to the holder of the
bill unless it is presented, or (in case the address given by such
acceptor on the bill is a place other than the place where the bill is
made payable) forwarded for presentment, not later than the day next
after the day of its maturity.
112.
When acceptor for honour may be charged.
112.When acceptor for honour may be charged. An acceptor for
honour cannot be charged unless the bill has at its maturity been
presented to the drawee for payment, and has been dishonoured by him,
and noted or protested for such dishonour.
113.
Payment for honour.
113.Payment for honour. When a bill of exchange has been noted or
protested for nonpayment, any person may pay the same for the honour
of any party liable to pay the same, provided that the person so
paying 1[or his agent in that behalf] has previously declared before a

43. notary public the party for whose honour he pays, and that such
declaration has been recorded by such notary public.
114.
Right of payer for honour.
114.Right of payer for honour. Any person so paying is entitled
to all the rights, in respect of the bill, of the holder at the time
of such payment, and may recover from the party for whose honour he
pays all sums so paid, with
---------------------------------------------------------------------
1 Subs. by Act 2 of 1885, s. 8, for "in the presence of a notary
public, subscribe the bill with his own hand, and".
2The words "and such declaration must be recorded by the notary in his
register " rep. by s. 8, ibid.
3 Ins. by s. 9, ibid.
---------------------------------------------------------------------
38
interest thereon and with all expenses properly incurred in making
such payment.
115.
Drawee in case of need.
115.Drawee in case of need. Where a drawee in case of need is
named in a bill of exchange, or in any indorsement thereon, the bill
is not dishonoured until it has been dishonoured by such drawee.
116.
Acceptance and payment without protest.
116.Acceptance and payment without protest. A drawee in case of
need may accept and pay the bill of exchange without previous protest.
CHAP
OF COMPENSATION

44. CHAPTER XII
OF COMPENSATION
117.
Rules as to compensation.
117.Rules as to compensation. The compensation payable in case of
dishonour of a promissory note, bill of exchange or cheque, by any
party liable to the holder or any indorsee, shall 1* * * be determined
by the following rules:-
(a) the holder is entitled to the amount due upon the
instrument, together with the expenses properly incurred in
presenting, noting and protesting it ;
(b) when the person charged resides at a place different
from that at which the instrument was payable, the holder is
entitled to receive such sum at the current rate of exchange
between the two places;
(c) an indorser who, being liable, has paid the amount due
on the same is entitled to the amount so paid with interest
at 2[eighteen per centum] per annum from the date of payment
until tender or realization thereof, together with all ex-
pennses coused by the dishonour and payment;
(d) when the person charged and such indorser reside at
different places, the indorser is entitled to receive such
sum at the current rate of exchange between the two places;
(e) the party entitled to compensation may draw a bill upon
the party liable to compensate him, payable at sight or on
demand, for the amount due to him, together with all expenses
properly incurred by him. Such bill must be accompanied by
the instrument dishonoured and the
---------------------------------------------------------------------
1 The words, figures and brackets "(except in cases provided for by
the Code of Civil Procedure, section 532)" omitted by Act 30 of
1926,s. 3.
2 Subs. by Act 66 of 1988, s. 3, for "Six per centum "(w.e.f. 30-12-
1988)
---------------------------------------------------------------------
39

45. protest thereof (if any). If such bill is dishonoured, the
party dishonouring the same is liable to make compensation
thereof in the same manner as in the case of the original
bill.
CHAP
SPECIAL RULES OF EVIDENCE
CHAPTER XIII
SPECIAL RULES OF EVIDENCE
118.
Presumptions as to negotiable instruments-
118.Presumptions as to negotiable instruments- Until the contrary
is proved, the following presumptions shall be made: -
(a) of consideragion; that every negotiable instrument was
made or drawn for consideration, and that every such
instru-
ment, when it has been accepted, indorsed, negotiated or
transferred, was accepted, indorsed, negotiated or
trans-
ferred for consideration ;
(b)as to date; that every negotiable instrument bearing a
date was made or drawn on such date ;
(c)as to time of acceptance; that every accepted bill of
exchange was accepted within a reasonable time after its date
and before its maturity ;
(d)as to time of transfer; that every transfer of a
negotiable instrument was made before its maturity;
(e)as to order of indorsements; that the indorsements
appearing upon a negotiable instrument were made in the order
in which they appear thereon;
(f)as to stamp; that a lost promissory note, bill of
exchange or cheque was duly stamped ;
(g)that holder is a holder in due course; that the holder of
a negotiable instrument is a holder in due course:provided
that, where the instrument has been obtained from its lawful

46. owner, or from any person in lawful custody thereof, by means
of an SP offence or fraud. or has been obtained from the
maker or acceptor thereof by means of an offence or fraud, or
for unlawful consideration, the burthen of proving that the
holder is a holder in due course lies upon him.
119.
Presumption on proof of protest.
119.Presumption on proof of protest. In a suit upon an instrument
which has been dishonoured, the Court shall, on proof of the protest,
presume the fact of is dishonour, unless and until such fact is
disproved.
40
120.
Estoppel against denying original validity of instrument.
120.Estoppel against denying original validity of instrument. No
maker of a promissory note, and no drawer of a bill of exchange or
cheque, and no acceptor of a bill of exchange for the honour of the
drawer shall, in a suit thereon by a holder in due course, be
permitted to deny the validity of the instrument as originally made or
drawn.
121.
Estoppel against denying capacity of payee to indorse.
121.Estoppel against denying capacity of payee to indorse. No
maker of a promissory note and no acceptor of a bill of exchange
1[payable to order] shall, in a suit thereon by a holder in due
course, be permitted to deny the payee's capacity, at the date of the
note or bill, to indorse the same.
122.
Estoppel against denying signature or capacity of prior party.
122.Estoppel against denying signature or capacity of prior
party. No indorser of a negotiable instrument shall, in a suit thereon
by a subsequent holder, be permitted to deny the signature or capacity
to contract of any prior party to the instrument.

47. CHAP
OF CROSSED CHEQUES
CHAPTER XIV
OF CROSSED CHEQUES
123.
Cheque crossed generally.
123.Cheque crossed generally. Where a cheque bears across its
face an addition of the words "and company " or any abbreviation
thereof, between two parallel transverse lines, or of two parallel
transverse lines simply, either with or without the words " not
negotiable," that addition shall be deemed a crossing, and the cheque
shall be deemed to be crossed generally.
124.
Cheque crossed specially.
124.Cheque crossed specially. Where a cheque bears across its
face an addition of the name of a banker, either with or without the
words " not negotiable," that addition shall be deemed a crossing, and
the cheque shall be deemed to be crossed specially, and to be crossed
to that banker.
125.
Crossing after issue.
125.Crossing after issue. Where a cheque is uncrossed, the holder
may cross it generally or specially.
Where a cheque is crossed generally, the holder may cross it
specially.
Where a cheque is crossed generally or specially, the holder
may add the words"' not negotiable".
---------------------------------------------------------------------
1 Subs. by Act 8 of 1919, s. 5, for " payable to, or to the order of,
a specified person ".
---------------------------------------------------------------------

48. 41
Where a cheque is crossed specially, the banker to whom it is
crossed may again cross it specially to another banker. his
agent, for collection.
126.
Payment of cheque crossed generally.
126.Payment of cheque crossed generally. Where a cheque is
crossed generally, the banker on whom it is drawn shall not pay it
otherwise than to a banker.
Payment of cheque crossed specially. Where a cheque is crossed
specially, the banker on whom it is drawn shall not pay it otherwise
than to the banker to whom it is crossed, or his agent for collection.
127.
Payment of cheque crossed specially more than once.
127.Payment of cheque crossed specially more than once.Where a
cheque is crossed specially to more than one banker, except when
crossed to an agent for the purpose of collection, the banker on whom
it is drawn shall refuse payment thereof.
128.
Payment in due course of corssed cheque.
128.Payment in due course of corssed cheque.Where the banker on
whom a crossed cheque is drawn- has paid the same in due course, the
banker paying the cheque, and in case such cheque has come to the
hands of the payee) the drawer thereof, shall respectively be entitled
to the same rights, and be placed in the same position in all
respects, as they would respectively be entitled to and placed in if
the amount of the cheque bad been paid to and received by the true
owner thereof.
129.
Payment of crossed cheque out of due course.

49. 129.Payment of crossed cheque out of due course.Any banker
paying a cheque crossed generally otherwise than to a banker, or a
cheque crossed specially otherwise than to the banker to whom the same
is crossed, or his agent for collection, being a banker, shall be
liable to the true owner of the cheque for any loss he may sustain
owing to the cheque having been so paid.
130.
Cheque bearing "not negotiable".
130.Cheque bearing "not negotiable". A person taking a cheque
crossed generally or specially, bearing in either case the words " not
negotiable," shall not have, and shall not be capable of giving, a
better title to the cheque than that which the person from whom he
took it had.
131.
Non-liability of banker receiving payment of cheque.
131.Non-liability of banker receiving payment of cheque. A banker
who has in good faith and without negligence received payment for a
customer of a cheque crossed generally or specially to himself shall
not, in case the title to the cheque proves defective, incur any
liability to, the true owner of the cheque by reason only of having
received such payment.
42
1[Explanation.-A banker receives payment of a crossed cheque for
a customer within the meaning of this section notwithstanding -that he
credits his customer's account with the amount of the cheque before
receiving payment thereof.]
2[131A.Application of Chapter to drafts. The provisions of this
Chapter shall apply to any draft, as defined in section 85A, as if the
draft were a cheque.]
CHAP
OF BILLS IN SETS
CHAPTER XV
OF BILLS IN SETS

50. 132.
Set of bills.
132.Set of bills. Bills of exchange may be drawn in parts, each
part being numbered and containing a provision that it shall continue
payable only so long as the others remain unpaid. All the parts
together make a set ; but the whole set constitutes only one bill, and
is extinguished when one of the parts, if a separate bill, would be
extinguished.
Exception.-When a person accepts or indorses different parts of
the bill in favour of different persons, he and the subsequent
indorsers of each part are liable on such part as if it were a
separate bill.
133.
Holder of first acquired part entitled to all.
133.Holder of first acquired part entitled to all. As between
holders in due course of different parts of the same set, he who first
acquired title to his part is entitled to the other parts and the
money represented by the bill.
CHAP
OF INTERNATIONAL LAW
CHAPTER XVI
OF INTERNATIONAL LAW
134.
Law governing liability of maker, acceptor or indorser of
foreigninstrument.
134.Law governing liability of maker, acceptor or indorser of
foreign instrument. In the absence of a contract to the contrary, the
liability of the maker or drawer of a foreign promissory note, bill of
exchange or cheque is regulated in all essential matters by the law of
the place where he made the instrument, and the respective liabilities
of the acceptor and indorser by the law of the place where the
instrument is made payable.

51. Illustration
A bill of exchange was drawn by A in California, where the rate
of interest is 25 per cent., and accepted by B, payable in Washington,
where the rate of interest is 6 per cent. The bill is endorsed in
3[India], and is dishonoured. An action on the bill is brought
against B in 3[India]. He is liable to pay interest at the rate of 6
per cent. only ; but if A is charged as drawer, A is liable to pay
interest at the rate of 25 per cent.
---------------------------------------------------------------------
1 Ins. by Act 18 of 1922, s. 2.
2 Ins. by Act 33 of 1947, s. 2.
3 Subs. by Act 3 of 1951, s. 3 and Sch., for "the States".
---------------------------------------------------------------------
43
135.
Law of place of payment governs dishonour.
135.Law of place of payment governs dishonour. Where a promissory
note, bill of exchange or cheque is made payable in a different place
from that in which it is made or indorsed, the law of the place where
it is made payable determines what constitutes dishonour and what
notice of dishonour is sufficient.
Illustration
A bill of exchange drawn and indorsed in 1[India], but accepted
payable in France, is dishonoured. The indorsee causes it to be
protested for such dishonour, and gives notice thereof in accordance
with the law of France, though not in accordance with the rules herein
contained in respect of bills which are not foreign. The notice is
sufficient.
136.
Instrument made, etc., out of India, but in accordance with the law
ofIndia.

52. 136.Instrument made, etc., out of India, but in accordance with
the law of India. If a negotiable instrument is made, drawn,
accepted or indorsed 2[outside India], but in accordance with the
3[law of India], the circumstance that any agreement evidenced by such
instrument is invalid according to the law of the country wherein it
was entered into does not invalidate any subsequent acceptance or
indorsement made thereon 4[within India].
137.
Presumption as to foreign law.
137.Presumption as to foreign law. The law of any foreign country
5* * * regarding promissory notes, bills of exchange and cheques shall
be presumed to be the same as that of 6[India], unless and until the
contrary is proved.
CHAP
NOTARIES PUBLICOF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES
FOR
INSUFFICIENCYOF FUNDS IN THE ACCOUNTS
7[CHAPTER XVII
NOTARIES PUBLIC
OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY
OF FUNDS IN THE ACCOUNTS
138.
Dishonour of cheque for insufficiency, etc., of funds in the account.
138.Dishonour of cheque for insufficiency, etc., of funds in the
account. Where any cheque drawn by a person on an account maintained
by him with a banker for payment of any amount of money to another
person from out of that account for the discharge, in whole or in
part, of any debt or other liability, is returned by the bank unpaid.
either because of the amount of money standing to the credit of that
account is insufficient to honour the cheque or that it exceeds the
amount arranged to be paid from that account by an agreement made
with that bank, such person shall be deemed to have committed an
offence and shall, without prejudice. to any other provision of this
Act, be punished with imprisonment for a term which may extend to one
year, or with fine which may extend to twice the amount of the cheque,

53. or with both:
Provided that nothing contained in this section shall apply
unless-
(a)the cheque has been, presented to the bank within a
period of six months from the date on which it is drawn or
within the period of its validity, whichever is earlier;
(b)the payee or the holder in due course. of the cheque as
the case may be, makes a demand for the payment of the
said amount of money by giving a notice, in writing, to the
drawer of the cheque, within fifteen days of the receipt of
information by him from the bank regarding the return of the
cheque as unpaid; and
(c)the drawer of such cheque fails to make the payment of
the said amount of money to the payee or, as the case may be,
to the holder in due course of the cheque, within fifteen
days of the receipt of the said notice.
Explanation.-For the purposes of this section, "debt or other
liability" means a legally enforceable debt or other liability.
139.
Presumption in favour of holder.
139.Presumption in favour of holder. It shall be presumed, unless
the contrary is proved, that the holder of a cheque received the
cheque of the nature referred to in section 138 for the discharge, in
whole or in part, of any debt or other liability.
140.
Defence which may not be allowed in any prosecution under section 138.
140.Defence which may not be allowed in any prosecution under
section 138. It shall not be a defence in a prosecution for an offence
under section 138 that the drawer had no reason to believe when he
issued the cheque that the cheque may be dishonoured on presentment
for the reasons stated in that section.
141.
Offences by companies.
141.(1)Offences by companies. If the person committing an offence
under section 138 is a company, every person who, at the time the

54. offence was committed, was in charge of, and was responsible to, the
company for the conduct of the business of the company, as well as the
company, shall be deemed to be guilty of the offence and shall be
liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render
any person liable to punishment if he proves that the offence Was
committed without his knowledge, or that he had exercised all due
diligence to prevent the commission of such offence.
(2)Notwithstanding anything contained in sub-section (1), where
any offence under this Act has been committed by a company and it is
proved that the offence has been committed with the consent or
connivance of, or is attributable to, any neglect on the part of, any
director, manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be deemed to
be guilty of that offence and shall be liable to be proceeded against
and punished accordingly,
Explanation.-For the purposes of this section,-
(a)"company" means any body corporate and includes a firm
or other association of individuals; and
(b) "director", in relation to a firm, means a partner in the
firm.
142.
Cognizance of offences.
142.Cognizance of offences. Notwithstanding anything contained in
the Code of Criminal Procedure, 1973 (2 of 1974),-
(a)no court shall take cognizance of any offence
punishable under section 138 except upon a complaint, in
writing, made by the payee or, as the case may be, the holder
in due course of the cheque;
(b)such complaint is made within one month of the date on
which the cause of action arises under clause (c) of the
proviso to section 138;
(c)no court inferior to that of a Metropolitan Magistrate
or a Judicial Magistrate of the first class shall try any
offence punishable under section 138.]
SCHE
[Enactments repealed.]